What is a litmus test in business?

A litmus test in business refers to a test concerning one singular aspect of a company's goals, operations, functions, or some other important element. There are actually many different litmus tests that entrepreneurs can perform to determine if a business idea is viable, including:

• Know your market inside and out

Understanding daily activities within a particular market is key to successful business ventures. You need to understand your market and the communities it serves. Your knowledge in these areas serves as a baseline business litmus test.

• Concept validation

Getting concept validation for your new business idea is essential. Forms of this litmus test include strategies like seeing how many pre-orders of your product you can receive, or running a giveaway of your new service or product. This proves that if you can't get people to sign up for something that could be free, your business concept might be faulty.

• Market research

Market research is an essential litmus test that most entrepreneurs and new companies utilize. Finding out if your new company, business venture, or business idea lines up well against the competition is crucial. You also need to "test" your new product or service concerning the consumer bases of your competitors to see how it stacks up.

• Ask for feedback from sources you trust

Many markets see thousands of new business ventures on a weekly basis, this not only makes market research critical, but also the vetting of your business concept from a trusted source who knows the industry you are planning on operating in. Bouncing your idea off of a veteran industry professional, such as a mentor, is a great litmus test for your new business.

• Survey consumers after sharing your story

Another great litmus test for new businesses is to survey consumers after you have told them your story and what you are planning on offering. You should be asking specific questions, like:

• Do you understand our product or service?

• Do you understand our company mission?

• Do you react positively or negatively to our proposal?

This can help you get a deep sense of what your target audience thinks and if you are lining up with their needs and desires.

• Experiment on a small scale

Experimenting on a small scale can do wonders for new business ventures, it can spur innovations off the back of your new business idea, and help you to possibly grasp a product or service that is truly unique. This type of litmus test also enables you to learn and adjust. To be adaptable. It is a method that can be used well into the life cycle of your service or product.